5 Trades for Wednesday | SchoolOfTrade Newsletter 10/25/16

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Notes for Tonight’s Newsletter:

Crude Oil is bearish and trading down at a triple measured-move after this afternoon’s API report, E-mini S&P is bearish and trading at the measured-move, just inches away from yesterday’s low, Gold is bullish and trading at the measured-move after a strong move higher, and the Euro is range-bound and trading at the highs with a perfect example of the ‘two try rule’ this evening.

Crude Oil is bearish and trading down at a triple measured-move after this afternoon’s API report pushed price below the range around $50.  The sellers have control, but professional won’t want to sell this low, so we will be looking for a correction back to resistance levels for the most reliable trading opportunities tomorrow.  Aggressive sellers may choose to sell now and sit through the pullback with the goal of reaching the news target down at 48.64, but conservative traders will be waiting for a pullback to the channel high, moving-average, range-low, any resistance level they can use to avoid selling low.  Buyers, on the other hand, need to wait for this strong bear trend to turn bullish, which means they need to get back above the moving-average and manage to hold a pullback, which we can see is going to be a challenge.

E-mini S&P is bearish and trading at the measured-move, just inches away from yesterday’s low which tells the sellers they need to beware selling low and focus on selling high for the most reliable opportunities tomorrow.  The sellers have control, but the low of the range is a hard place to sell, let alone when you have the measured-move and PLOD right below it.  The only way sellers can sell lower is after a strong break down and then hold below the PLOD, if not, they need to wait for price to move back up to the high of the range and look for opportunities there.  Buyers, on the other hand, would love to see price push through the high of the range and hold a pullback for a move back up to test the battle zone and possibly all the way back to re-test today’s high.

Gold is bullish and trading at the measured-move after a strong move higher today which tells the bulls to be looking for opportunity to ‘buy low’ down at the 71.7 reversal-line, or look for a successful breakout-pullback above the measured-move to buy new highs tomorrow.  Whenever I see a strong move like this I always think of three scenarios.  First, buyers keep the move going and we get the breakout-pullback above the 76.9 measured-move.  Second, buyers take profit and price pulls back to support and we look for seller-failures to buy the move back up to re-test the highs, and third, the buyers fail to keep control and price collapses back down to re-test the lows.  Sellers will have their window below the 71.7 reversal-line and then again below the 67.9 swing for the move down, but they don’t want to mess with the battle zone.

Euro is range-bound and trading at the highs with a perfect example of the ‘two try rule’ which means the sellers will be looking for buyers to fail so they can sell back into the range, while the buyers are looking to hold this pullback for a successful breakout and a measured-move target waiting overhead.  The goal is simple for trading a range; buy low, sell high, avoid the middle, focus on failures and use the ‘pendulum swing’ to find targets.  We first saw the sellers try and breakout to new lows but after two tries they failed and buyers sent price racing higher, using the ‘pendulum swing’ for the target.  Now price is at the highs with the buyers trying twice and this is where they need to hold or sellers will be selling back down again.